‘Giveaway’ takeover deal agreed by bank (From The Northern Echo)

‘Giveaway’ takeover deal agreed by bank

8:29am Tuesday 15th July 2008 in

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SPANISH banking firm Santander made its second move into the UK market yesterday after agreeing a £1.26bn deal to buy Alliance and Leicester.

The bank plans to merge the former building society with Abbey - which it bought in 2004 - creating a business with 959 UK branches and a share of more than eight per cent of the savings and personal loans market.

It has agreed the takeover with A&L's board and the deal should be completed in October - if no rival offer emerges.

David Cumming, head of UK equities at Standard Life Investments, which holds a 2.35 per cent stake in A&L, said Santander was acquiring A&L on "giveaway terms".

A&L demutualised in 1997 and has about 214,000 private investors, representing about 38 per cent of shareholders.

They will receive one Santander share for every three of A&L, or 299p a share.

The A&L board agreed to the deal to provide certainty in troubled financial markets.

Santander said it would pump about £1bn into A&L, which employs 7,000 staff, to shore up the group's finances.

Shares in A&L had fallen from more than £12 in May last year to a low of 213.25p earlier this month, following concerns at its ability to ride out the credit crunch. But A&L's chief executive, David Bennett, could not rule out job cuts.

He said: "I can't say to you today that there won't be job losses, but this deal is not predicated on job losses."

Mr Bennett said the lender could have stood on its own, but the deal offered certainty to investors.

Santander, the biggest bank in Europe, expects to make annual savings of more than £180m by the end of 2011.

Andy Kerr, deputy general secretary of the Communication Workers Union, said: This is potentially a very serious situation for members in Alliance and Leicester. A takeover by any company already active in the UK could mean a potential large number of job losses.

Staff at A&L deserve to have answers about their future and we urge the company to be upfront about their intentions.'' At the same time, a North- East building society's chief executive has revealed how refusing to join the rush to become a bank has led them to flourish when others are in takeover talks. Newcastle Building Society chief executive Colin Seccombe said that an announcement on 50 jobs for the region would be made within days.

Mr Seccombe said he expected to announce the jobs as part of the 500 positions the Newcastle still expects to create over a five-year period.

In an interview, carried out before the Santander announcement, Mr Seccombe said: "You can see that some of those who have converted have not been able to stay the course over a period of time.

"You had the issue of having to be big enough to warrant independent existence after you convert.

"If anything, the events of recent months have reinforced the benefits of remaining mutual."' Shares in A&L soared almost 50 per cent yesterday after the announcement.